Progressive Development Corporation v. Quezon City
REITERATIONFacts
1. The Antecedents: The case concerns Quezon City Ordinance No. 7997, Series of 1969, and its amendment, Ordinance No. 9236, Series of 1972. Ordinance No. 7997 imposed a 10% supervision fee on the gross receipts from stall rentals in privately owned public markets, with penalties for non-compliance including revocation of the permit to operate. Ordinance No. 9236 amended this to a 5% tax on gross receipts from rentals and stipulated that consistent failure to pay for three consecutive months would lead to permit revocation or other collection actions. Progressive Development Corporation, owner of the Farmers Market & Shopping Center, challenged these ordinances. 2. Procedural History: Progressive Development Corporation filed a Petition for Prohibition with Preliminary Injunction against Quezon City before the Court of First Instance of Rizal. The corporation argued that the supervision fee/tax was an income tax, which Quezon City was prohibited from imposing under Republic Act No. 2264. Quezon City, through its City Fiscal and the Solicitor General, contended that the imposition was a valid privilege tax or license fee within its authority. The corporation later filed a Supplemental Petition, alleging payment under protest of the 5% tax for certain months, and moved for judgment on the pleadings. The lower court dismissed the petition, ruling the imposition was a privilege tax, not an income tax. Progressive Development Corporation then filed the present Petition for Review with the Supreme Court. 3. The Petition: The petitioner, Progressive Development Corporation, seeks review of the lower court's decision, arguing that the 5% tax on gross receipts from stall rentals imposed by Quezon City Ordinance No. 9236 is an income tax, which respondent is prohibited from levying under Section 2(g) of Republic Act No. 2264. The petitioner contends that the imposition is not a valid license fee because it is not primarily for regulation and bears no reasonable relation to the costs of regulation. The core of the petition is to determine whether the questioned imposition is a prohibited income tax or a permissible license fee/tax for regulation.
Issue(s)
Whether the 5% tax on gross receipts from stall rentals imposed by Quezon City Ordinance No. 9236 is a prohibited income tax or a valid license fee. Whether respondent City had the authority to impose such a tax.
Ruling
The Supreme Court affirmed the decision of the lower court, dismissing the petition for lack of merit. The Court held that the 5% tax imposed by Ordinance No. 9236 is a license tax or fee for the regulation of the business of operating a privately owned public market, and not a prohibited income tax.
Ratio Decidendi
On whether the 5% tax on gross receipts from stall rentals is a prohibited income tax or a valid license fee: The Court held that the imposition is a license tax or fee, not a prohibited income tax. The operation of a privately owned public market, even if privately owned, is established for public service and warrants close supervision and control by the City for public health, prevention of fraud, and general welfare. The 5% tax, imposed under Ordinance No. 9236, is for the regulation of this business. The Court distinguished between a tax and a license fee, noting that a license fee is imposed under police power primarily for regulation, while a tax is under taxing power primarily for revenue. If regulation is the primary purpose and revenue is incidental, it is a license fee. The Court found that the imposition related to an activity requiring regulation for public interest and bore a reasonable relation to the probable expenses of regulation and supervision. The use of gross stall rentals as a basis for computation does not convert the license tax into a prohibited income tax, as it can reasonably relate to the extent of regulation needed. The Court presumed the rate to be reasonable in the absence of proof of excessiveness or confiscatory nature. On whether respondent City had the authority to impose such a tax: The Court affirmed that respondent City had the authority. Section 12 of the Revised Charter of Quezon City authorizes the City Council to tax, fix license fees, and regulate businesses, including those involved in the preparation and sale of provisions. Furthermore, Section 2 of the Local Autonomy Act grants chartered cities authority to impose municipal license taxes or fees upon persons engaged in business or exercising privileges within the city. The Court noted that the grant of authority to the Quezon City Council was comprehensive, including the power to "tax," "regulate," and "fix the license fee." The imposition was found to be within the City's taxing and regulatory powers, as expressly granted by its Charter and the Local Autonomy Act.
Main Doctrine
A tax imposed on the gross receipts of stall rentals from a privately owned public market, for the purpose of regulation and supervision, is considered a license tax or fee, not a prohibited income tax, provided it bears a reasonable relation to the probable expenses of regulation and supervision.